Denver’s white-hot real estate market is cooling slightly, but don’t expect a buyer’s market anytime soon. According to Clear Capital, a national real estate forecasting company, metro Denver home prices will rise 7.7 percent in 2016, a 4 percent point drop from last year’s robust 11.7 percent gain.
Factors that will affect eventual sales prices this year are increasing interest rates, overzealous sellers with overpriced homes and the 20,000 luxury apartment units coming online this year.
Developers are flooding the market with apartments in large part due to Colorado’s construction defects law, which gives condominium owners great latitude to sue developers for faulty building practices. The law doesn’t apply to rentals. Some law reform has been attempted at the state level, but none has yet passed. In its absence, a number of cities – including Lakewood – have passed reform minded ordinances in hopes of luring back condominium development. Low condominium development is credited with helping to cause the metro area’s skyrocketing home prices and apartment rental rates.
Apartment growth tends to only support one type of expanding demographic here: young single members of the millennium generations. Families are overlooked – as are the negative impacts of unchecked high-rise buildings on parking and traffic. A shadow is being cast over Denver, as it is becoming known nationally for its refusal to consider the ancillary effects of building vertical masses throughout the city.
In our own backyard, prices soared last year, with Hilltop’s 114 home sales averaging $387 a square foot, and Crestmoor’s 24 home sales averaging $400 a square foot. Scraped homes are once again rising in demand, with the top land sales last year at 307 Clermont Street selling for $104 per square foot and 20 S Bellaire selling for $91 per square foot. The last time our homes appreciated this strongly was during the period from 2004 to 2006. Unfortunately, a housing bust followed after. Some experts believe that our relatively low inventory compared to a decade ago mitigates the risk of a similar bust – we’re keeping our fingers crossed.
All indications, according to many experts in the field, is that Denver will remain one of the top housing markets nationally for at least two more years. We do expect a healthy correction in the real estate market during this time, as more (but not too much) for-sale inventory comes online, causing a better balance between buyers and sellers.